Total Entertainment Restaurant Corporation History



Address:
9300 East Central Suite 100
Wichita, Kansas 67206
U.S.A.

Telephone: (316) 634-0505
Fax: (316) 634-6060

Public Company
Incorporated: 1997
Employees: 1,850
Sales: $56 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: TENT
NAIC: 72211 Full-Service Restaurants

Company Perspectives:

The company is committed to providing a superior experience that includes high quality menu items, a wide variety of domestic, imported, and premium beers, state-of-the-art audio and video systems and tournament-quality pocket billiard tables. These features, combined with the Company's focus on high level of customer service, help build a loyal clientele and attract new guests.

Key Dates:

1989:
Dennis Thompson opens the first Bailey's Sports Grille.
1994:
Steven Hartnett and Mark Lee open the first Fox and Hound.
1996:
Well-known restaurateur Jamie Coulter purchases the Fox and Hound chain.
1997:
Coulter acquires the Bailey's Chain, forms Total Entertainment Restaurant Corporation as parent company for the two chains, and takes the new company public.
1999:
Jamie Coulter resigns as CEO of Total Entertainment; Dennis Thompson and Steve Hartnett become co-chairs.

Company History:

Total Entertainment Restaurant Corporation is a Wichita, Kansas-based company consisting of three restaurant chains: Fox and Hound, Bailey's Sports Grille, and Bailey's Pub and Grille. The Fox and Hound chain is the company's largest, containing approximately 25 restaurants located in more than a dozen states. TEC's Bailey's Sports Grille chain consists of approximately nine locations in five states, and its Bailey's Pub & Grille is a four-unit chain with locations in three states. All three chains combine dining and entertainment in the form of both televised sporting events and onsite games of skill like billiards, darts, and shuffleboard. Total Entertainment's restaurants are located in both major urban areas and in smaller regional markets--in most cases in shopping centers. The average unit is 9,000 to 10,0000 square feet in size and contains between 175 and 200 seats. Total check amounts average between $10 and $12.

Early 1990s: Two Separate Chains

The company that was ultimately to become Total Entertainment Restaurant Corp. started as two small restaurant chains developed separately. The oldest of the two, Bailey's Sports Grille, began in a strip mall in Charlotte, North Carolina, in November 1989. Its founder, Dennis Thompson, was a veteran restaurateur, who had previously been a Godfather's Pizza franchisee and had gone on to found the Lone Star Steakhouse chain. In 1989, Thompson owned and operated Creative Culinary Concepts, a parent company for his small chain of Lone Stars.

Reportedly, Thompson's decision to open a new sports bar stemmed in part from a question he put to his Lone Star employees: What did they like to do for fun after work? Their answer--go to bars to play pool or watch sports--indicated a market for a combination drinking-dining-entertainment establishment. So Thompson designed Bailey's as a casual sports bar and restaurant with decent but simple food, numerous televisions carrying satellite and cable coverage of sporting events, and games of skill like pool and darts.

After operating Bailey's for four years, Thompson decided to expand. In 1994, he opened two additional Bailey's, one in Little Rock, Arkansas, and another in Greenville, South Carolina. The new locations were modeled after the original one--with a central dining area, a gaming area around the perimeter, and dozens of TVs.

While Thompson was getting his second and third restaurants up and running, two Texans--Steve Hartnett and Mark Lee--were in the process of launching the other chain that would eventually be part of Total Entertainment: the Fox and Hound. Like Thompson, Hartnett and Lee had backgrounds in restaurant management. The 44-year-old Hartnett had originally run pubs geared to college students. Then, in the 1980s, working as a stock trader and money manager, he had developed an intense interest in billiards. It was through pursuit of this hobby that he met Mark Lee, a 29-year-old former restaurant manager who shared Hartnett's passion for the game. Together, the two men decided to open an upscale pool hall and pub. They styled their new bar/restaurant to resemble an English pub, naming it Fox and Hound English Pub and Grille. The first Fox and Hound opened in August 1994 in a shopping mall in Arlington, Texas, and almost immediately Hartnett and Lee added two more locations to their small venture. In September, the duo opened a Fox and Hound in College Station, Texas, the home of Texas A&M University. Just a few months later, in December 1995, a third Fox and Hound was opened, in Dallas.

Through the remainder of 1995 and 1996, Hartnett and Lee's venture stalled at three units. Meanwhile, Thompson was expanding his chain aggressively, more than doubling its size In April 1995, Bailey's moved into Tennessee, establishing a location in Nashville. Two more Tennessee locations--Knoxville and Johnson City--followed in December 1995 and May 1996. In October, Thompson opened his seventh Bailey's, in Columbia, South Carolina. For that year, Bailey's posted $9.3 million in sales and $1.5 million income.

1997: Jamie Coulter and Total Entertainment

In late 1996, Steve Hartnett was approached by Jamie Coulter, a well-known restaurateur based in Wichita, Kansas. Coulter headed up his own company, Coulter Enterprises, a restaurant-management group that operated a string of Pizza Hut franchises. But he was best known as the CEO and Chairman of the highly successful Lone Star Steakhouse chain, which had been founded in the 1980s by Dennis Thompson.

Coulter had a long and impressive history in the restaurant business. He had become a Pizza Hut franchisee in 1965, going on to open more than 170 Pizza Hut locations in the course of fifteen years. In 1980, he dissolved his original franchise operation and opened Coulter Enterprises, which managed a smaller number of Pizza Huts. In 1991, he had become involved with the Lone Star brand, and expanded it exponentially.

Coulter offered $5 million in cash and $20 million in IPO stock for Hartnett's three-unit Fox and Hound chain, which had annual sales of around $5.5 million. Hartnett, who had been looking for a way to expand the concept, saw the offer as just the opportunity he needed. Coulter's next move was to acquire the Bailey's chain, which he did in February 1997. Coulter already had a working relationship with Thompson. In 1991, he had teamed with Lone Star founder to grow the chain and ultimately to take it public. Thompson had remained involved with the company, serving as a director and vice-president.

When Coulter acquired the two chains, he created a new entity, Total Entertainment Restaurant Corp., to serve as a parent company them, and arranged for his other company, Coulter Enterprises, to handle their accounting and administrative duties. Total Entertainment was headquartered in Dallas and had a seasoned management team that included some of Coulter's long-time colleagues. While Coulter held the chairman's position, the new company's CEO and president was Gary Judd, formerly vice president of special projects for Coulter Enterprises. Dennis Thompson served as a member of the board of directors.

Although developed independently of one another, Total Entertainment's two chains had much in common. Both marketed themselves as "social gathering places" rather than just restaurants--locations that joined dining and entertainment, in the form of games and televised events. Both were considered to be "upscale casual," which meant dress codes, stylish decor, and better-than-average pub food.

The two chains also shared an important feature that distinguished them from much of their competition: a kitchen that stayed open until 3:00 a.m. The restaurants' late-night hours proved to have quite an appeal for patrons. In a May 1999 interview with Restaurant Hospitality, Gary Judd explained, "It's a great part of our business because when the malls, retail outlets, and other restaurants shut down, we're the place people go. The 11 p.m. to 3 a.m. period is lucrative."

No sooner had Coulter formed Total Entertainment than he began preparing to take it public. In spring 1997, the company filed a prospectus, and in July made an initial public offering (IPO) of two million shares. The IPO generated approximately $19.5 million. The remainder of 1997 was a characterized by expansion for Total Entertainment. In September, the company opened a fourth Fox and Hound, in Memphis, Tennessee, the first of that chain to be located outside Texas. In October, a Bailey's opened in Nashville, and in December 1997, two more Fox and Hounds were launched, in Chicago and Omaha.

1998-99: Expansion and Leadership Changes

At the beginning of 1998, Total Entertainment consisted of six Fox and Hounds and nine Bailey's Sports Bars. Together, the chains had locations in eight states. The company spent the new year in a whirlwind of growth, opening 12 new Fox and Hounds. The expansion dramatically broadened the chain's geographic presence, adding locations in Alabama, Ohio, Missouri, Pennsylvania, Kansas, Louisiana, and North Carolina. The company also opened three additional Bailey's locations, in Atlanta, Detroit, and Chapel Hill, North Carolina. These new restaurants were named Bailey's Pub & Grille, rather than Bailey's Sports Grille, and were styled more along the lines of the Fox and Hound units.

By the end of 1998, Total Entertainment operated 32 restaurants, twice as many as it had just 12 months earlier. The growth spurt had increased the company's sales significantly--from $18.56 million in 1997 to $34.11 million in 1998. In addition, income almost doubled, growing from $1.08 million in 1997 to $2.08 million in 1998.

The beginning of 1999 brought with it major shifts in leadership for Total Entertainment. Jamie Coulter, who had headed up the company for less than two years, resigned from his position as chairman of the board to focus his attention on his Lone Star Steakhouse chain. At the same time, Gary Judd stepped down as CEO, although continuing to serve as the company's president. Steve Hartnett and Dennis Thompson became co-chairs of Total Entertainment, and the CEO's office was filled by Steven Johnson, who had previously been the chief operating officer of Coulter Enterprises. With the changes in leadership, the company's headquarters moved from Dallas to Wichita, Kansas.

Under Hartnett and Thompson's guidance, Total Entertainment suspended its focus on new unit development. A handful of new locations--those that were already in development--

Total Entertainment spent 1999 and 2000 implementing a range of measures to make their operation run more efficiently and more profitably. They increased the number of district managers from four to six, reducing the number of locations each manager was responsible for and thereby allowing for more hands-on and time-intensive management. They also attempted to reduce turnover in their unit-level management--a problem notorious in the restaurant industry--by introducing a new compensation and rewards plan. Finally, they reworked the menus, adding 19 new selections designed, in part, to appeal to lunch patrons. The company's efforts were rewarded almost immediately by same-store sales growth throughout the remainder of 1999 and all of 2000.

Future Expansion

By the end of 2000, the company once again began to grow--albeit at a much more conservative pace than it previously had--opening new units in Parma, Ohio, Dearborn, Michigan, and Lewisville, Texas. In 2001, it moved into two new states, developing two restaurants in Denver, Colorado, and one in Phoenix, Arizona. It managed to maintain the positive sales trend begun in early 1999, posting higher than 5 percent growth in same-store sales for the first half of 2001.

Going forward, it appeared as though Total Entertainment would continue to grow at a measured pace. In an August 2001 interview with the Wall Street Transcript, Total Entertainment's president, Steven Johnson, said that the company planned to open at least seven new locations per year for the next few years. This manageable rate of expansion, he said, would allow for selectivity in site location. "Since we have limited growth plans we're not just putting sites on so that we can meet our development quota," he explained.

Principal Operating Units: Bailey's Sports Grille; Bailey's Pub and Grille; Fox and Hound English Pub and Grille.

Principal Competitors: Champps Entertainment, Inc.; Dave & Buster's, Inc.; Hooters of America, Inc.

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